Medical billing is a complex process involving submitting accurate claims to insurance companies to reimburse providers. In this process insurance claims denials can be frustrating, especially when you’re counting on coverage for medical expenses, procedures, or essential services. As you will just receive a notice from the insurance company; your claim has been denied.
Whether you’re a patient or a healthcare provider, understanding why claims get denied by the insurance companies and how to avoid those pitfalls, can save time, money, and unnecessary stress. This blog provides comprehensive insights into claim denials and offers clear, actionable tips to help you prevent them.
Why do Insurance Claims get Denied?
Insurance claims go through a detailed review process, by the claims adjusters. If anything in the documentation doesn’t align with the insurer’s coverage guidelines, billing procedures, or timelines, the claim may be denied or rejected.
It’s important to know the difference between two basic outcomes from insurance companies:
- Rejected Claim: These claims are returned even before the processing phase by the insurance companies due to incorrect patient data, invalid codes, missing information and authorization details.
- Denied Claim: These claims are fully reviewed by insurance companies and found not to meet policy requirements. Usually reasons are like, non-covered services, lack of medical necessity, or errors caught during the initial process. Denials typically required an appeal process for reconsideration to secure payment for the services being rendered.
Common Reasons for Insurance Claim Denials and How to Prevent Them
Below are some common reasons for insurance claim denials that every practice or healthcare provider should be aware of before submitting a claim to the insurance company:
1. Missing or Incorrect Information
Claims are often denied due to missing or incorrect information, such as patient birthdates, age, insurance ID numbers, or provider details. Even small missing pieces of information or data entry errors can trigger automatic denials from insurance companies. All of the mentioned information is essential for the health insurance company to determine whether to approve the application and at what reimbursement rate.
How to prevent it:
- Always double-check claim forms before submission to catch errors and omissions early.
- Use claims management software or electronic health records (EHRs) to streamline the process and reduce human error.
- Ensure diagnosis and procedure codes are correct and up-to-date to avoid denials.
- Attach all necessary documentation, such as referrals, authorizations, or medical records.
- Keep up-to-date with payer-specific guidelines and policy changes.
2. Lack of Medical Necessity
The insurer determined that the treatment was not medically necessary based on their specific laws criteria, which may include clinical guidelines, diagnosis codes, the type and duration of treatment, and whether less costly alternatives were available. If the treatment doesn’t align with these standards, the claim may be denied
How to prevent it:
- Collaborate with healthcare providers to ensure detailed documentation supports the medical necessity of services.
- Include pre-authorization and physician notes when required, as they can significantly strengthen a claim.
- Verify a patient’s insurance eligibility before beginning any treatment plan.
- Confirm coverage details, co-pays, and pre-authorization requirements.
- Check for insurance limitations or exclusions related to the proposed treatment.
- Take proactive steps to prevent claim denials, delays, or out-of-pocket surprises for the patient.
3. Out-of-Network Provider
When patients receive care from out-of-network providers, their claims are often denied or only partially reimbursed, leading to higher out-of-pocket costs. Insurance companies typically cover a smaller percentage of the costs for out-of-network services, if at all, which can leave patients responsible for the majority or even the full amount of the bill. This can result in surprise bills for the patient, especially if prior authorization was not obtained or if the patient was unaware the provider was out-of-network.
How to prevent it:
- Verify the provider’s network status before scheduling procedures or visits to ensure they are in-network.
- Use insurer-provided online tools to check patient eligibility in advance, including for emergency situations.
- Confirm coverage for specific services under the patient’s health plan to avoid unexpected claim rejections.
- Document verification steps and outcomes as part of the patient’s record for future reference.
- Educate and train front office staff on how to use eligibility and network verification tools effectively.
4. Missing Prior Authorization
The patient service procedure required prior authorization (pre-approval) from the insurance company, but it was not obtained before the treatment was performed. Without this authorization, the insurer may deny the claim regardless of medical necessity, leaving the patient or provider responsible for the full cost. Prior authorization is a common requirement for specialized general surgical procedures and high-cost diagnostics services.
How to prevent it:
- Always check with the insurance company before scheduling high-cost or complex treatment plans.
- Confirm if prior authorization is required to avoid delays or claim denials.
- Establish internal workflows for tracking pre-authorization and documentation requirements.
- Assign responsibility to specific staff members to manage authorization requests and follow-ups.
- Keep records of all communications with insurance providers, including reference numbers and approvals.
5. Expired Policy or Coverage
The patient’s insurance policy was inactive or was on hold at the time the services were rendered. This means there was no valid coverage in place, and as a result, the claim was denied. Policies can become inactive due to non-payment of premiums, expiration, or termination by the insurer or policyholder.
How to prevent it:
- Confirm that the patient’s insurance coverage is active and premiums are current.
- Verify coverage again on the date of service to catch any recent changes or lapses.
- Use real-time eligibility verification tools provided by insurers for accurate, up-to-date information.
- Inform patients in advance if there are any issues with coverage or potential out-of-pocket costs.
- Document all verification steps for audit purposes and to support any future appeals.
6. Services Not Covered by Policy
The patient procedure or medication is not included in the patient’s benefits package, meaning it is excluded from coverage under their specific health plan. Health insurance policies vary widely, and some may exclude certain treatments, experimental procedures, or brand-name medications. As a result, the claim is denied, and the patient may be responsible for the full cost of the service.
How to prevent it:
- Review the insurance policy’s coverage details before providing or receiving treatment.
- Encourage patients to understand their coverage before scheduling visits or procedures.
- Both providers and patients share the responsibility of verifying what services are included.
- When in doubt, contact the insurance company directly to confirm if a specific service is covered.
- Avoid assumptions about coverage even common procedures may have plan-specific restrictions.
7. Duplicate Claims Submission
Submitting the same claim multiple times, whether accidentally or intentionally can trigger the insurer’s fraud detection system, leading to automatic denial or delay in processing. Duplicate claims are a common reason for rejections and can create confusion in the billing process, even lead to costly penalties due to fraudulence.
How to prevent it:
- Use a tracking system to confirm successful submission of claims and avoid accidental duplicates.
- Check the claim status regularly to track progress and avoid unnecessary resubmissions.
- Verify claim details before resubmitting to ensure no errors or omissions.
- Ensure proper documentation is attached to the claim to prevent delays.
- Establish a system for managing resubmissions, including a timeline to avoid confusion and redundancy.
8. Late Claim Filing
The claim was submitted after the insurer’s filing deadline, which typically ranges from 30 to 180 days from the date of service. Missing the claim submission date can result in an automatic denial, regardless of the claim’s validity. It’s essential for providers to be aware of and adhere to each payer’s specific timeframe to ensure timely reimbursement.
How to prevent it:
- Know the time limits for claim submission as defined by insurance providers.
- Submit claims promptly to avoid missed deadlines and potential denials.
- Incorporate claim submission deadlines into your billing workflows for better efficiency.
- Train staff on time-sensitive claim submissions to ensure timely processing.
- Monitor and track submission dates to maintain compliance with insurance timelines.
9. Coding Errors or Missing Modifiers
The coding error in CPT, ICD, HCPCS, or even missing modifiers on a claim can lead to its denial. Incorrect or mismatched coding with the services provided can also lead to claims being denied or delayed by the insurance companies. Insurers always rely on precise codes to determine the medical necessity and coverage eligibility for specific treatments.
How to prevent it:
- Keep coding manuals and systems up to date to reflect the latest codes, guidelines, and industry changes.
- Ensure billing staff are properly trained on current coding standards and procedures.
- Conduct regular audits to assess and maintain accuracy in coding and billing practices.
- Stay informed about new coding requirements and updates from governing bodies (e.g., ICD-10, CPT, HCPCS).
- Implement ongoing education and refresher courses for billing staff to reinforce accuracy and compliance.
- Maintain a system for tracking coding errors and use them as learning opportunities for staff training.
10. Coordination of Benefits (COB) Issues
The insurer requires clarification on which plan is the primary payer, particularly when the policyholder has multiple insurance plans. In such cases, coordination of benefits is essential to determine the correct order of payment, ensuring that claims are processed accurately and the appropriate plan covers the costs.
How to prevent it:
- Update Coordination of Benefits (COB) information regularly with all insurers involved.
- Confirm the primary and secondary insurance policies before submitting claims to ensure correct billing order.
- Verify patient insurance details to ensure accurate coordination between multiple insurers.
- Ensure proper documentation is included to support the COB and billing order.
- Regularly communicate with insurers to resolve any discrepancies in the COB information.
- Maintain records of all COB-related updates to ensure proper tracking and compliance.
What to Do If Your Claim Is Denied
Getting a denial doesn’t always mean you’re out of options. Follow these steps:
- Review the Explanation of Benefits (EOB): It provides the reason for denial.
- Contact Your Insurance Provider: Clarify the issue and ask what documentation is needed to appeal.
- File an Appeal: Most insurers allow 30–180 days to appeal a denial. Include all relevant records and a letter from your healthcare provider if applicable.
- Track Everything: Keep a log of calls, documents, and appeal submission dates.
Tips for Reducing Claim Denials
Whether you’re a patient or healthcare provider, these best practices can reduce the risk of denials:
- Use claims software to automate and validate submissions.
- Train staff on up-to-date coding and billing procedures.
- Verify coverage and benefits before services are rendered.
- Keep thorough documentation of medical necessity and authorizations.
- Outsource your medical billing services to any expert.
- Respond quickly to any insurer requests or denial notices.
Final Thought:
Claim denials are often avoidable with a little diligence, communication, and documentation. By understanding the common reasons behind denials — and taking proactive steps to prevent them — you can protect yourself from unnecessary expenses and delays.
Professional billing experts ensure timely claim submissions, minimize denials, and stay updated on ever-changing regulations. By outsourcing, your medical billing services with Nexus io, can focus on providing excellent patient care while our experts handle the complexities of billing and compliance.
